A victory in the labour court in December challenging the extension of bargaining council agreements in the metal and engineering industry to non-parties to the agreement, is one of three such challenges this year, which could re-shape the labour landscape in South Africa.

The December decision by judge Andre van Niekerk of the Johannesburg Labour Court upheld the application of the National Employers' Association of South Africa (Neasa) to set aside a decision by the Minister of Labour in September 2011 to extend to non-parties an agreement primarily onwages and conditions between the Seifsa (the Steel and Engineering Industries Federation of South Africa), and six trade unions.

Neasa challenged the 2011 extension with a number of arguments. However, the judge found it necessary to hear argument on only one aspect and ruled in favour of Neasa. This was that the agreement between Seifsa and the trade unions had been extended to non-parties by the minister in terms of section 32(3) of the Labour Relations Act.

Section 32(3) requires that the parties to the agreement must represent more than 50% of employees and employers (by employee numbers) in the industry and in that event, the minister may extend the agreement to non-parties without consulting further.

The union's party to the 2011 extension represented slightly less than 50% of employees, but employer representivity was well over 50% because Seifsa has a number of big-employer affiliates.

In his order, the judge postponed the reversal of the 2011 agreement for four months to give the minister the opportunity to reissue the extension under section 32(5) of the act.

Section 32(5) allows for less than 50% representivity where the parties to the bargaining council are nonetheless found to be "sufficiently representative" and the minister is satisfied that not extending the agreement "may undermine collective bargaining".

However, under this section, representation has to be sought to ­ascertain whether this is so. This is now being done in this case.

Bargaining council Van Niekerk also suspended the order because of the uncertainty and confusion that would arise regarding remuneration and other benefits if the agreement were to be reversed, as well as the likelihood of tension and serious disputes such as have occurred in the mining and agricultural sectors.

Gerhard Papenfus, the chief ­executive of Neasa, said that the organisation would submit representations to the minister arguing that even if she ­re-extended the agreement under section 32(5), it would be illegal because the bargaining council for the industry was not constituted according to its own constitution at the time of the agreement. There are also a number of other legal grounds for challenging the extended agreement.

Papenfus said that the cases could go on indefinitely, so the situation would have to be resolved by negotiation. He said Neasa's fundamental point was that if institutions wanted to create laws such as the extension of an agreement to non-parties, they would have to comply with the letter of the law.

He said that because Neasa had become more involved in issues such as these, it had been rapidly gaining membership among small metal and engineering companies. These companies had hitherto felt bullied by the bargaining council and the larger employers and unions in it.

Lucio Trentini, the operations director of Seifsa, said that the challenge by Neasa was not so much about the body of the 2011 agreement, but the principle of extending it to non-parties.

"We have a central bargaining system in South Africa. We cannot have a situation where the minority decides to do what is in its best interest," he said. "In 2011, when this agreement was extended, Neasa had a membership of about 907 employers in the industry, employing about 22 000 employees. By contrast, Seifsa had a membership of about 2254 employers and about 160 000 employees. We have a number of large member companies, but also small and medium enterprises.

"The central bargaining system is not perfect, but it works until someone can invent a better mousetrap. A free-for-all in the industry would not be good. Under central bargaining, we have had only three strikes in 20 years. The wage rates we have agreed with the unions are not out of line with other industries.

Extension of agreements "Ironically, the challenge from Neasa is pushing Seifsa and the unions closer than they have ever been before," Trentini added.

The Neasa and Seifsa court actions are only the first of various legal challenges to the bargaining council system. On January 29, in the KwaZulu-Natal High Court in Pietermaritzburg, some entitied that were not party to the 2010 clothing industry bargaining council agreement will challenge its extension on various grounds: first, that the minister did not, in extending it, comply with the Labour Relations Act; second, that she did not act fairly in that she did not consult non-parties; and third, that she acted unreasonably because she did not look at the impact on unemployment of extending the agreement to non-parties.

Another broader case, which will not refer to any particular sector but to constitutional rights, is under preparation and is likely to be brought in the Pretoria High Court within a few months. That case is backed by the Free Market Foundation, which will apparently present a large amount of research from South Africa and overseas indicating that the extension of agreements to non-parties destroys jobs.

The foundation argues that in the bargaining council system, a private agreement is turned into a law which is imposed on non-parties. It says relatively uniform conditions should not be applicable to all in a particular industry because of diverse realities and a diversity of working conditions.

An observer commented that all the cases attacked the extendability of agreements to non-parties, though the first two cases were limited to particular industries.

"Many extensions of bargaining council agreements can be challenged because, for extension, you have to go through a number of hoops, including satisfying conditions of representivity," he said.

"Although there have been a huge number of unhappy non-parties in the past – mainly smaller companies – these agreements have not been challenged. Now, suddenly, there is a welter of legal challenges."

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